OTC: Government regulations won't eliminate risks, panelists say

By OGJ editors

Government regulators can work with oil and gas producers to monitor data, but this does not eliminate the risk of incidents such as the 2010 Deepwater Horizon disaster, panelists said in a May 2 session of the Offshore Technology Conference in Houston.

Rather, the goal of the US Bureau of Safety and Environmental Enforcement and the Bureau of Ocean Energy Management is to put rules into place to mitigate risk and avoid such incidents.

Christopher Smith, deputy assistant secretary with the US Department of Energy, said the key for the three new agencies—BSEE, BOEM, and the Office of Natural Resources Revenue—that resulted from the demise and reorganization of the US Minerals Management Service, is to have an ongoing relationship with industry to build on experiences “so that we’re not reinventing the wheel,” Smith said.

Smith suggested that the oil and gas industry and regulators learn from other sciences, such as the space industry, how to use algorithms to predict well behavior and thereby prevent disasters. New rules must mitigate risks, Smith said.

US Rep. Bill Flores (TX-17) said there is no risk-free activity. The initial failure in the Macondo well blowout involved the human element, and changing a corporate culture is tough to do through regulations, Flores said. Instead, he agreed with Smith that government regulators can work with the industry to look at data to attempt to mitigate risk.

Gulf activity

Lanier Yeates, with the law firm Gordon Arata McCollam & Eagan LLC, said the reason operators have returned to the Gulf of Mexico following the post-Macondo drilling moratorium despite a hostile regulatory environment is the high price of oil. Yeates said if the industry cannot drill offshore US, operators will deploy capital and equipment elsewhere.

Robert Kessler, managing director and head of integrated oil research with Tudor Pickering Holt & Co., noted that the pace of drilling activity in the gulf is picking up but that approvals to drill in the gulf now take three times as long at 150 days vs. 54 days pre-Macondo.

Drilling activity has been weighted toward the major operators, Kessler said, as the top three companies drilling there have been Royal Dutch Shell PLC, Anadarko Petroleum Corp., and Chevron Corp. Additionally, well intensity in the gulf has increased, with the top 50 fields accounting for 71% of production and the top 6 fields accounting for 41% of production in the gulf.

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